The crypto market is feeling pressure after a continuous wave of selling on Tuesday. Several assets have now found levels of support, but if the U.S. dollar continues to strengthen, it could indicate a possible prolonged downturn.
Bitcoin rose about 1% since midnight UTC after two days of declines that brought it down to the lowest price since June at one point. Ether, which experienced a drop of as much as 20% over 48 hours—the steepest drop in three months—gained 2%.
While the CoinDesk 20 Index, which measures the largest cryptocurrencies, is down 2.5% over 24 hours, it reflects yesterday’s activity: it is up 2.2% since midnight UTC, with only one component down.
The altcoin market appears to be worse off than Bitcoin, which has been maintaining the $99,000 support level. Many tokens have retraced their gains from July, suggesting that the brief “altcoin season” has ended, with the focus shifting back to Bitcoin and its ability to withstand this recent turmoil.
Derivatives Positioning
By Saksham Diwan
- The BTC futures market shows increasing caution. Open interest has dropped to $25.3 billion from $26 billion last week, indicating that traders are decreasing leverage. Compared to the higher BTC price year-over-year, this decline points to a relative lack of leverage in the market.
- The three-month annualized basis is low at 3%-4%, suggesting the basis trade is unappealing. Funding rates are mixed but low across major venues (4%-9% annualized), showing a lack of strong trend commitment and general caution in the futures market.
- The bitcoin options market is exhibiting mixed but volatile signals.
- Implied volatility is high for all expirations, indicating heightened expectations for near-term movement. Structurally, the implied volatility term structure shows near-term backwardation before returning to a long-term contango.
- Despite this volatility, the recent trading bias has turned bullish, with the 24-hour put-call volume leaning 58%-42% in favor of calls, suggesting a preference for upside.
- The recent price drop was largely driven by leveraged unwinds, with $1.7 billion liquidated over the past 24 hours, skewed 76%-24% in favor of long positions. Ether saw the highest notional losses with $572 million liquidated.
- Importantly, the average long liquidation volume over the last two days at $1 billion is significantly above the seven-day average of $620 million, indicating the pronounced effect of forced selling on current price movements.
- Going forward, any bounce may encounter immediate resistance, particularly at the key price level of $102,500, which has $124 million in potential liquidations.
Token Talk
By Oliver Knight
- The altcoin market is in oversold conditions following Tuesday’s heavy selling that saw several tokens reach their lowest points in months.
- The average crypto relative strength index (RSI) sits at 38/100, with tokens like OKB, SKY, and FLR recording values as low as 23/100. This indicates that while the overall crypto market is leaning bearish, a short-term relief rally might be imminent.
- Any sign of a bounce could be nullified if Bitcoin and Ether break below their respective support levels at $99,000 and $3,100.
- If both BTC and ETH decline further, altcoins are likely to suffer more due to insufficient liquidity and unbalanced leverage levels, leading to dramatic downside movements.
- Traders will be questioning whether the recent “altcoin season” has officially concluded, with most tokens, barring privacy coins, losing their rallies from July and August.
- The narrative surrounding privacy coins remains a significant factor in the current market; while DCR and ZEC pulled back on Wednesday, XMR rose 7%, and the entire sector remains notably higher over the past month.
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